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2017 (4) TMI 349 - AT - Income TaxIncome from sale of agricultural land - Computation of LTCG - cost of acquisition computation - Held that - Though, the assessee tried to substantiate the sale agreement, he failed to prove the genuineness of sale agreement with necessary evidences. All the evidences filed by the assessee in the form of affidavit from the parties who acted as witnesses to the transactions has been negated by the A.O. by bringing a clear fact to the effect that the party to the agreement Shri P.V. Prasad has given a statement, wherein he has categorically disowned the agreement. Therefore, we are of the view that the assessee failed to prove the unregistered sale agreement with necessary evidences to accept his claim that he has made outright sale of agricultural land to Shri P.V. Prasad. Sale consideration stated to be received from sale of land - Held that - A.O. has brought out a clear fact to the effect that the assessee himself has executed individual sale deeds in favour of the buyers of the flats and consideration has been directly paid to the assessee. The A.O. further observed that the consideration shown in the sale deed is lesser than the guidance value of the property as per the sub-registrar value for the purpose of payment of stamp duty. Accordingly, the A.O. has worked out a sale consideration of ₹ 4,46,99,501/- and applied the provisions of section 50C of the Act for the purpose of computation of long term capital gain. We find that as per the provisions of section 50C of the Act, when the sale consideration shown in the sale deed is less than the guidance value of the property for the purpose of payment of stamp duty, the SRO value has to be considered as deemed consideration for the purpose of transfer of property. In this case, the assessee has executed sale deeds and the consideration agreed in the sale deed is less than the guidance value of the property. Therefore, we are of the view that the A.O. was right in computing the long term capital gain based on the guidance value of the property as per the SRO value. Cost of acquisition of the property - Held that - Though, the assessee furnished a copy of registered document vide document no.2201 dated 25.3.1980, the A.O. observed that the document furnished by the assessee relates to sale of vacant residential flat, which cannot be applied to sale of agricultural lands. We find force in the findings of the A.O., for the reason that the lands sold by the assessee are agricultural lands and market value of the property as on 1.4.1981 has to be taken as per the SRO value, which is applicable to the agricultural lands, but not for the vacant residential flats. The A.O. has obtained a certificate from the SRO, which indicates the market value of the agricultural land as on the date of sale. Therefore, we are of the view that the A.O. was right in re-computing cost of acquisition by adopting value of ₹ 25,000/- per acre. Application of the provisions of section 45(2) - Held that - A.O. was erred in not considering the alternative plea of the assessee for computation of income from sale of land by applying the provisions of section 45(2) of the Act. We further opined that, it is for the A.O. to compute the income by applying appropriate provisions of the Act, even though the assessee has made an incorrect claim to compute the income. In this case, although the assessee made alternative plea for computation of income by applying the provisions of section 45(2) of the Act, the A.O. has rejected the plea without assigning any reasons. Therefore, we are of the view that the A.O. was erred in not considering the plea of the assessee, with reference to the provisions of section 45(2) of the Act. The CIT(A) after considering the relevant provision has rightly observed that, the case of the assessee squarely fall within the provision of section 45(2) of the Act and the A.O. was erred in not considering the assessee s plea for application of Section 45(2) of the Act. Therefore, we deem it appropriate to remit the issue back to the file of the A.O. for the limited purpose of verification of computation filed by the assessee and direct the A.O. to consider the alternative plea of the assessee with reference to the relevant materials and direct him to recompute the income by applying the provisions of section 45(2) of the Act. Appeal filed by the revenue is allowed for statistical purposes.
Issues Involved:
1. Validity of the unregistered, un-possessory sale agreement. 2. Computation of long-term capital gain. 3. Cost of acquisition of the property. 4. Application of Section 45(2) of the Income Tax Act. Detailed Analysis: 1. Validity of the Unregistered, Un-possessory Sale Agreement: The primary issue revolves around the validity of an unregistered, un-possessory sale agreement dated 3.12.2007, purportedly entered into between the deceased assessee and Shri P. Venkata Prasad for the sale of agricultural land. The Assessing Officer (A.O.) rejected the agreement, citing that Shri P. Venkata Prasad denied entering into any such agreement and claimed the signature on the agreement was forged. The A.O. listed several reasons for rejecting the agreement, including the fact that the agreement was unregistered, un-possessory, and the consideration was paid mostly in cash. The CIT(A), however, held that the assessee had indeed entered into an agreement for the sale of the property, supported by affidavits and other evidences, and directed the A.O. to compute long-term capital gain based on this agreement. 2. Computation of Long-term Capital Gain: The A.O. computed the long-term capital gain based on the sale deeds executed by the assessee to various flat buyers, rejecting the sale agreement. The A.O. adopted the market value of the property as deemed consideration under Section 50C of the Income Tax Act due to discrepancies between the consideration shown in the sale deed and the sub-registrar's value. The CIT(A) directed the A.O. to consider the sale agreement for computing the long-term capital gain, which was challenged by the revenue in the appeal. 3. Cost of Acquisition of the Property: The assessee claimed a cost of acquisition of ?4,95,465/- as on 1.4.1981, which was indexed to ?28,83,306/-. The A.O. questioned this valuation and obtained a certificate from the SRO, which indicated a lower market value for the property. The A.O. reworked the cost of acquisition by adopting ?25,000/- per acre instead of the assessee's claim. The CIT(A) upheld the A.O.'s re-computation of the cost of acquisition. 4. Application of Section 45(2) of the Income Tax Act: The assessee alternatively pleaded for the application of Section 45(2) of the Act, arguing that the conversion of investment into stock-in-trade should be considered, which would result in both capital gains and business income. The A.O. rejected this plea, stating that the assessee had computed long-term capital gain under normal provisions. The CIT(A) found merit in the assessee's alternative plea and held that the provisions of Section 45(2) should be applied. The Tribunal agreed with this view and directed the A.O. to re-compute the income by considering the provisions of Section 45(2). Conclusion: The Tribunal allowed the appeal for statistical purposes, directing the A.O. to verify the computation filed by the assessee and re-compute the income by applying the provisions of Section 45(2) of the Income Tax Act. The Tribunal upheld the A.O.'s re-computation of the cost of acquisition but found that the A.O. erred in not considering the alternative plea of the assessee regarding the application of Section 45(2).
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